Union Finance Budget for Financial Year 2007-2008, Government of India… (India is Shining)

Union Finance Minister (Govt. of India) P Chidambaram presented the Union Budget for 2007-08 in Parliament on Wednesday, 28th Feb. 2007.

The Following are the Highlights:

While Chidambaram kept income tax limit unchanged, he increased the threshold limit by Rs 10,000 giving every assessee a relief of Rs 1,000.

Deduction in respect of medical insurance under Section 80 (D) increased to Rs 15,000 and Rs 20,000 for senior citizens.

Exemption limit for women was increased to Rs 145,000 and for senior citizens to Rs 195,000.

Dividend distribution tax raised from 12.5 to 15 per cent.

ESOPs to be brought under FBT.

Expenditure on samples and free distribution items to be exempted from fringe benefit tax.

Additional revenue from direct taxes to yield Rs 3000 crore and indirect taxes revenue neutral.

Tax exemption on aviation turbine fuel sold to turbo prop aircraft extended to all small aircraft less than 40,000 kg.

Withdrawals by central and state governments exempted from Banking Cash Transaction Tax. The limit for individuals and HUF raised from Rs 25,000 to Rs 50,000.

Two lakh people to benefit out of service tax exemption. Govt to lose Rs 800 crore as a result.

Service tax on Residents Welfare Associations whose members contribute more than Rs 3,000.

Surcharge on Corporate income tax on companies below Rs one crore removed.

Tax free bonds to be issued by state-owned urban local bodies.

Five year tax holiday for two, three, four star hotels and convention centres with a seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam

Minimum Alternate Tax being extended.

Benefits of investment in venture capital funds confined to IT, bio-technology, nano-technology, seed research, dairy among some others.

Excise duty on cement reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag at retail market. Those sold above Rs.190 will attract excise duty of Rs.600 per tonne.

Corporate tax: No surcharge for firms with a taxable income of Rs 1 crore (Rs 10 million) or less.

E-governance allocation to be increased from Rs.395 to Rs.719 crore.

Indian investors to be allowed investment in overseas capital markets through mutual funds. Mutual funds to set up Infrastructure Fund schemes.

Any requirement for security of the nation to be provided.

Backward Regions Grant Fund to be raised to Rs 5800 crore.

A high-powered committee report aimed at making Mumbai a world class financial centre submitted.

Public suggestions will be invited.

Rs 50 crore provided to begin work on vocational education mission for which Task Force in Planning Commission is chalking out a strategy.

1,396 Indian Technical Institutes to be upgraded to achieve technical excellence.

An autonomous Debt Management Office in government to be set up.

Government to create one lakh jobs for physically challenged. Government will reimburse the EPF contributions of employers in the case of physically challenged people taken on rolls of the company and included in the PF scheme. A fund of Rs 150 crore to be started which will go up to Rs 450 crore.

An Expert Committee to be set up to study the impact of climate change in India.

Rs 150 crore to be given to Ministry of Youth and Sports for Commonwealth Games and Rs 350 crore to the Delhi Government for the purpose. Rs 50 crore to be provided for the Commonwealth Youth Games in Pune.

Rs 100 crore for recognising excellence in the field of agricultural research.

VAT revenues increased by 24.3 per cent in the first nine months of 2006-07.

A national level goods and services tax to be introduced from next fiscal.

Fiscal deficit to be 3.7 per cent in the current year and revenue deficit two per cent.

Fiscal management enabled States consolidate debt to the tune of Rs.1,10,268 crore and 20 states availed of debt waiver to the tune of Rs.8575 crores. The share of States from the revenue expected to touch Rs.1,42,450 crore during 2007-08 as against Rs.1,20,377 crore during 2006-07.

Total expenditure estimated at Rs 6,81,521 crore.

Increase in gross tax revenue by 19.9 per cent, 20 per cent and 27.8 per cent in first three years of UPA government. Intend to keep tax rates moderate.

Peak customs duty rate on non-agricultural items reduced from 12.5 to ten per cent.

All coking coal fully exempted from duty.

Duties on seconds and defective reduced from 20 to ten per cent.

Customs duty on polyster to be reduced from ten per cent to 7.5 per cent.

Fiscal deficit for 2007-08 pegged at 3.3 per cent of GDP at Rs.1,50,948 crore. Revenue deficit at Rs.72,478 crore which will be 1.5 per cent.

Total expenditure during 2006-07 estimated at Rs.6,80,521 crore including Rs.40,000 crore for SBI shares.

Duty on pet food reduced from 30 per cent to 20 per cent.

Duty on sunflower oil to be reduced by 15 per cent.

Duty reduced on watch dials and movements and umbrella parts from 12.5 to five per cent.

Import duty of 15 specified machinery to be reduced from 7.5 per cent to five per cent.

Economy grows 8.6 per cent in third quarter of this fiscal compared to 9.3 per cent in the year-ago period

Three per cent import duty to be levied on private importers of aircraft including helicopters.

No change in general CENVAT rate.

Ad valorem duty on petrol and diesel to be brought down from eight to six per cent.

Export duty on iron ore and concentrate at the rate of Rs.300 per tonne. Export duty on Cromium proposed at Rs 2000 tonne.

Small-scale industries excise duty exemption raised from Rs one crore to Rs 1.5 crore.

Manufacturing sector grows at 10.7 per cent, agriculture at 1.5 per cent during October-December 2006-07.

Excise duty for plywood reduced from 16 per cent to eight per cent.

Food mixes to be fully exempted from excise duty.

Excise duty for plywood reduced from 16 per cent to eight per cent.

Bio-diesel to be fully exempted from excise duty.

Water purification devices, small and big, fully exempted from excise. Specific rates of excise duty on cigarettes increased.

Excise duty on Pan Masala without tobacco as mouth freshners reduced from 66 per cent to 45 per cent.

PAN to be made single identity card for all securities/stocks/MFs related transactions.

Insurance companies to launch a senior citizens scheme in 2007-08.

Defence budget increased to Rs 96,000 crore

Tourism infrastructure to get an allocation of Rs.520 crore as against Rs.423 crore last year.

The ceiling of loans for weaker sections under deferential rate of interest scheme will be raised from Rs 6500 to Rs 15,000 and in housing loan from Rs 5000 to Rs 20,000.

Regulations would be put in place for mortgage guarantee company for housing loans.

Regional Rural Banks, which are willing to take up greater responsibilities, to undertake aggressive branch expansion programme. One RRB branch for each of 80 districts so far uncovered. RRBs to accept NRE and FCNR deposits.

FDI inflows between April and January this fiscal touched $12.5 bn while portfolio investment reached $6.8 billion

Technology Upgration Fund in textiles to continue during the 11th Plan. Rs 911 crore to be provided for this.

Allocation for National Highway Development programme to be stepped up from Rs 9,955 crore to Rs 12,600 crore.

Work on Golden Quadrilateral road project nearly complete. Considerable progress made on North-South, East-West corridor and likely to be completed by 2009.

Northeastern region will get Rs 405 crore for highway development. Road-cum-rail project over Brahmaputra in Bogibil, Assam.

Health insurance cover for weavers to be enlarged to ancillary industries. Allocation increased from Rs 241 crore to Rs 321 crore.

A scheme for modernisation and technological upgradation of choir industry for which Rs 23.55 crore has been earmarked.

Manufacturing growth rate estimated at 11.3 per cent.

9.2 per cent GDP growth rate estimated in 2006-07.

Average growth for last three years is 8.6 per cent.

Saving rate of 32.4 per cent, investment rate of 33.8 per cent will continue.

A number of proposals to perk up agriculture to be announced.

Average inflation in FY’07 to be 5.2-5.4 per cent; govt confident of managing inflation

Bank credit rate grew by 29 per cent during first ten months of 2006-07

Inflation during 2006-07 estimated at between 5.2 and 5.4 per cent against 4.4 per cent during the previous year.

Abhijit Sen report on forward trading to be submitted in two months’ time.

Additional irrigation potential of 24 lakh hectares to be implemented, including nine lakh hectares under Accelerated Irrigation Benefit Programme.

Economy in a stronger position than ever before.

15,054 villages have been covered under rural telephony and efforts to be made to complete the target of covering 20,000 villages by 2006-07.

Allocation on Healthcare to increase by 21.9 per cent.

Allocattion for education to be enhanced by 34.2 per cent.

Two lakh more teachers to be employed and five lakh more classrooms to be constructed.

Secondary education allowance to be increased from Rs.1,837 crore to Rs.3,794 crore.

Government committed to fiscal reforms.

Foreign exchange reserves stand at 180 billion dollars.

Allocation under Rajiv Gandhi Drinking Mission stepped up from Rs 4680 crore to Rs 5850 crore.

Government concerned over inflation and would take all steps for moderating it.

Already a number of steps on fiscal, monetary and supply management side have been taken.

Annual target of 15 lakh houses under Bharat Nirmal Programme to be exceeded.

Allocation for National Rural Health Mission stepped up from Rs 8207 crore to Rs 9947 crore.

Gross budgetary support in 2007-08 raised to Rs 2,05,100 crore from 1,72,728 crore in 2006-07. Of this, budgetary support to the Central plan will go up to 1,54,939 crore against 1,72,728 crore.

School dropout rates high. To prevent dropout, a National Means-cum-Merit scholarship to be implemented, with an allocation of Rs 6,000 per child.

Rs 1290 crore to be provided for elimination of polio. Intensive coverage will be undertaken in 20 districts in UP and 10 districts in Bihar. This will be integrated into NRHM.

National AIDS Control Programme to achieve zero level disease.

Measures for significant improvement of health care in rural area.

Allocation for ICDS programme to be increased from Rs 4087 crore to Rs 4761 crore.

30 more districts under NREGA. Additional allocation of Rs.12,000 crore for it.

Rs 800 crore for Sampoorna Gram Rozgar Yojana in districts not covered by NREGA. Swarna Jayanti Swarozgar Yojana allocation increased from Rs 250 crore to Rs 344 crore.

Computerisation of PDS and integrated computerization programme for FCI.

Allocation for schemes only for SCs and STs to be increased to Rs 3271 crore.

Rs 63 crore for share capital for National Minorities Development Finance Corporation following Sachar Committee recommendations.

Allocation for SC/ST scholarships enhanced from Rs.440 crore to Rs.611 crore.

Scholarships programme for minorities students to be of the order of Rs 72 crore for pre-metric, Rs 48 crore for graduate and postgraduate.

Total Budget for the Northeastern region raised from Rs 12,041 crore to Rs 14,365 crore.

New Industrial Policy for the northeastern region to be in place before March 31.

Women’s development allocation will be Rs.22,282 crore.

Rs 7,000 crore allocation for better tax administration to be used for social schemes.

Rs 2,25,000 crore farm credit proposed in the new budget. A target of additional 50 lakh farmers to be brought under farm credit.

Farmers’ credit likely to reach Rs.1,90,000 crore as against the targeted Rs.1,75,000 crore during 2006-07.

Special Purpose Tea Fund to rejuvenate tea production.

Rs 100 crore allocated for National Rainfed Area Authority.

One hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging scheme.

World Bank signed agreement for revival of 5,763 waterbodies in Tamil Nadu. Loan component Rs 2,182 crore. To have a command area of four lakh hectares. Similar agreement with Andhra Pradesh in March for recharge of 2,000 bodies. Command area 2.5 lakh hectares.

Bonds worth Rs 5,000 crore to augment NABARD to be issued.

Death and disability cover for rural landless families to be introduced, known as ‘Aam Aadmi Bima Yojana’.

70 lakh households to be covered under a social welfare scheme with LIC and with support from state governments.

50 per cent of the premium at Rs.200 per household to be given by the Centre. Rs.1,000 crore fund to be maintained by LIC for the purpose.

Central public sector enterprises will be given Rs 16,261 crore as equity support and loans of over Rs 2600 crore.

Community Shopping Centers – Description and Financing

Community shopping centers generally have less than 200,000 square feet in gross leasable area. They may be designed as enclosed or open-air malls or as strip centers. The centers are organized around one or more of the major national or regional retailers, one or two “junior” department stores, or a store owned by a company specializing in smaller department store operations. A junior department store will generally have between 30,000 and 50,000 square feet and feature a full line of soft goods (clothing, books, and so on) and often some hard goods (appliances, furniture, and so on).

In the 1980s, major national and regional discount department stores emerged as new, significant anchors for community shopping centers. Retailers such as K-Mart (of the S.S. Kresge Corporation) and Wal-Mart became the dominant force in retail sales growth in the United States in the late 1980s. These stores, usually between 75,000 and 125,000 square feet, compete for discount shoppers with merchandise priced below that of the traditional department store. These super-discounters have become the most popular anchors in many new community strip centers because of their heavy advertising, low prices, and excellent locations, which generate shopping traffic.
Community shopping centers generally require trade areas with populations of 100,000 or more. However, these centers are often located in smaller towns that serve as a shopping area for a larger, multi-community area. Besides the anchor stores, the 10 tenants most likely to appear in these centers are:
women’s ready-to-wear shops

restaurants (with liquor service)

fast food/carryout restaurants

beauty salons

family shoe shops

jewelry shops

card and gift shops

restaurants (without liquor service)

women’s specialty clothing shops

banks

In strip centers, the anchor usually has a central location; if there are several anchors, they are separated. It is important to remember that because of the
weather-exposed design of strip centers, shoppers generally walk for shorter distances between stores to shop than is the case in an enclosed mall area. Rents in strip centers will generally run 40 percent to 60 percent less than those found in similar retail areas in enclosed malls. As a rule, sales per square foot will be correspondingly lower than sales in enclosed malls.

Like major department stores, food stores are destination stores. The other tenants depend to some extent on the occasional or impulse sales afforded by a good location in the pedestrian traffic pattern between the larger stores. Like the anchors in large super-regional malls, destination stores in community shopping centers often pay rents that cover only the costs to the center’s owner; the more specialized retailers pay rents that represent true profit potential.

Regional Shopping Centers – Description and Design

The tenant profiles of regional centers differ
little from those of the super- regional malls. The tenants in regional malls
paying the highest rent and having the highest sale’ volume per square foot of
tenant area are also similar to the tenants of the super-regional malls. Many
tenants occupy very little square footage and have relatively low actual sales
volume.

The term regional shopping center also can apply to very large strip
shopping centers. The term strip center generally refers to a shopping
center with a single line of tenants or single-side design, in contrast to a
mall in which shops face one another across a pedestrian area. A regional
shopping center features one or more regional or major department stores, each
at least 100,000 square feet in size. The
strip center may also feature a food store, which is seldom found in malls.
Strip designs for regional centers are most often found where inclement weather
would not deter the pedestrian traffic necessary between the anchor tenants and
the local tenants.

The term power center denotes a regional strip center of unusual size.
Often 300,000 to 500,000 square feet or more, these huge centers feature a
preponderance of anchor tenants with less than 15 percent local tenants. They
often combine off-price or home-improvement customer appeal.

Funding Your Business – Alternative Sources of Finance

Given current reports in the media about the lack of funding available to SME’s (small and medium sized businesses), you’d be forgiven for thinking that financing the development of your business is almost impossible. However, this is not quite the case – with the correct approach there are alternatives that can pave the way to a more flourishing future.

For example, in the East of England area, Finance East Loan Management Limited has now committed in excess of £3.3m in loans to thrity SMEs. Funded by the EEDA, the Regional Growth Loan Scheme is available to local limited companies with a minimum turnover of £500k, and which can demonstrate a requirement for long-term investment to deliver the strong development potential that they are showing.

“We are well into our 2nd year of existence and it’s clear from the number of approaches we are receiving that there is significant demand for the type of loan facility we are offering,” explains Stuart Ager, Senior Fund Manager at Finance East. “In an economy that seems very patchy at present, the lending environment remains tight for growth orientated SMEs and we continually meet driven management teams who have strategies and market opportunity to expand, but cannot do so because of lack of finance – that is the role of the Regional Growth Loan Scheme – to provide a level of funding that will enable a business to move forward and add to the economic development of this region.”

The EEDA Regional Growth Loan Scheme fills the gap between conventional debt and equity funding. It can be a stand-alone funding source, but is complementary to other sources of finance such as traditional bank borrowing. The loans are typically of amounts between £50k and £200k, paid in tranches, and repaid over terms of between two and five years. The interest rate offered varies between 5-9% over the base rate, depending on the risk level, while security is typically mortgage debenture, and also subject to a risk assessment.

As with any finance application, the key to success is a clear business strategy that can deliver the forecast growth, outlined in a detailed business plan. You will need to:

Identify the ways in which funding will best support your short and long term business goals
Get your company’s financial statistics ready with detailed breakdowns of past performance, current status and forecast activity
Provide you with relevant market intelligence that shows how you compare favourably against competitors
Help you optimise your management structure
Single out the KPIs (Key Performance Indicators) that have positive impacts on your business to demonstrate that you are a proactive, professional organisation.

CBHC LLP can help you to clarify your business strategy and get your business ready for growth. If you are interested in applying for one of these EEDA-funded loans, do give our Corporate Finance team a call on +44 (0)1245 453881 – and let us help you to get the funding that you need to take your business to the next level.

CBHC Chartered Accountants LLP are one of the largest practices in Essex, England, with offices in Chelmsford and Romford.

Services include: business advisory, wealth management, audit, accountancy, taxation.

Commercial Financing Super Regional Malls – Description and Design

Super-regional shopping malls represent the largest single concentration of retail shops in the shopping center format. Super-regional malls, often more than one story in height, may exceed 1 million square feet in leasable area. A few “super-regional” malls are in excess of 2.1 million square feet; however, most are between 1.1 and 1.5 million square feet of gross leasable area. The term super- regional indicates that the market area the center serves has a population of 300,000 or more. The term mall indicates that the shops are to be clustered around a core area usually restricted to pedestrian traffic. Most of the recent successful super-regional malls have been totally enclosed, roofed, and air-conditioned. The tenants lease space for their merchandising area, plus basements and other storage space, employee rest areas, and offices. Tenants also pay a pro rata share of the expenses of operating the enclosed, purely public spaces in the mall; each share is based on a formula of the tenant’s percentage of gross leasable area to the total leasable area.

Super-regional malls are generally “anchored” by at least four major retail departments stores. These huge retailers have advertising budgets, reputations, and size that generate considerable shopping traffic. Anchor tenants often demand and receive rent concessions; they may even build and own their own buildings on space donated by the developer to attract them to the mall. In terms of rent paid, the anchors usually offer only break-even benefit to the developer; however, they are often key to the success of the other retailers, who pay higher rents to make up for the anchors’ concessions.

Besides the anchor department stores, a variety of other tenants are attracted to super-regional malls. The 10 most prevalent mall tenants (after department stores), listed in order of their occurrence, are

  • women’s ready-to-wear shops
  • jewelry shops
  • fast food carryout restaurants
  • menswear shops
  • women’s shoe stores
  • women’s specialty clothing shops
  • family shoe shops
  • card and gift shops
  • department stores
  • special apparel–unisex clothing shops

The design of the super-regional mall is often critical to the success of the non-anchor chain stores and local tenants. Such tenants get the exposure they need from the pedestrian traffic between the anchors. A four-cornered pattern creates the maximum amount of traffic for local shops. If a mall includes tenants such as restaurants or movie theaters, which create their own traffic, a central location on the pedestrian path is less critical. (Often, restaurants and movie houses will be segregated, if possible, as they often cause congestion and litter that are inconvenient to other tenants.)

In addition to higher rents per square foot of leased space, retailers pay more to operate in a super-regional mall than to operate in an open-air or “strip” shopping center. This is primarily because mall tenants must pay a pro rata share of the cost of heating, cooling, and cleaning an enclosed pedestrian space.

Chad Mayes is the creator of CEMLending Connection [http://www.cemlending.com], a resource which provides commercial mortgage loan financing and residential refinance and purchase options. This article is copyright of CEMLending Connection [http://www.cemlending.com]. This article may be reproduced as long as author’s name and all links remain intact.